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    Vedant Fashions

    MANYAVARGood
    Consumer Services·31 Jan 2025
    Management Summary

    Vedant Fashions delivered a resilient Q3 performance characterized by stable margins despite a challenging macro environment for middle-class consumption. While overall SSSG was modest at 2.6%, the company saw a strong recovery in Tier 2 and 3 cities and double-digit L2L growth in regions outside of Andhra Pradesh and Telangana. Management is adopting a cautious approach to retail expansion due to high rental inflation, prioritizing store quality and sustainable unit economics over aggressive rollout.

    Highlights

    7

    • Revenue from operations reached ₹511 crores, representing a 7.8% YoY growth.

    • Maintained industry-leading margins with Gross Margin at 67.3% and EBITDA Margin at 47.4%.

    • Profit After Tax (PAT) stood at ₹158 crores with a healthy PAT margin of 30.9%.

    • Same-Store Sales Growth (SSSG) was 2.6% overall, but notably higher at ~5% when excluding AP and Telangana.

    • Retail footprint expanded to 1.75 million square feet across 666 stores globally.

    • Online segment saw explosive growth of 70% YoY, though it remains a small part of the mix at 3-4%.

    • Mohey brand productivity has reached parity with Manyavar, contributing 25-30% of business in shared stores.

    Concerns

    1

    • Regional Concentration Weakness

    What Changed2

    vs Q4 FY25

    Tone shiftNeutral → GoodGuidance items2 → 3 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue from Operations₹511 Cr+7.8%YoY
    2. 02EBITDA Margin47.4%
    3. 03Profit After Tax₹158 Cr
    4. 04Same-Store Sales Growth2.6%
    5. 05Gross Margin67.3%

    Segment breakdown

    Mohey (Women's Wear)
    27.5% Business Contribution27.5% Retail Area Allocation
    Online / Marketplace
    3.5% Revenue Share70% Quarterly Growth
    List

    Guidance & targets

    3
    CategoryTargetPriority
    Capacity
    Gross Retail Area Addition
    1,70,000 - 1,80,000 sq ft
    		High
    Capacity
    Twamev EBO Openings
    2
    		High
    Margin
    Marketing Spend Increase
    40-70 bps
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Regional Concentration Weakness

    Andhra Pradesh and Telangana, historically strong markets, are significantly underperforming the rest of India, dragging down overall SSSG. — Both acknowledged

    high

    Rental Inflation

    High rental expectations in core markets are hindering the pace of new store signings and footprint expansion. — Management acknowledged

    medium

    Middle-Class Consumption Slowdown

    Management noted that middle-class consumption for apparel has not returned to previous levels, impacting discretionary spend. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Direct comparison with Sai Silks' growth in the same 'weak' region.
    • Specific guidance for store openings in FY26.

    Q&A highlights

    3

    “But a majority of what we understand from this is brands which are closer to us in their offering, which are more men's celebration wear brands, that is where the pain has sort of lied in that market.”

    The analyst challenged management's claim of macro weakness in AP/Telangana by citing a competitor (Sai Silks) that reported 7% SSSG in the same region. Management's response suggests the weakness might be specific to their sub-segment (men's ethnic) rather than a general regional macro issue.

    asked by Akhil Parekh

    2 min read5 chapters

    Detailed Narrative

    01

    Regional Performance Divergence

    A key theme of the call was the stark contrast between performance in Andhra Pradesh (AP) and Telangana versus the rest of India. While overall SSSG was 2.6%, excluding these two states, SSSG was approximately 5% for the quarter and 10% for the combined Q2 and Q3 period. Management noted that AP and Telangana, which are high-penetration areas for the company, have been 'laggards' due to macro factors that they are still investigating, as other retailers in those states reportedly show similar trends.

    02

    Strategic Pivot in Marketing

    Vedant Fashions is evolving its marketing strategy, moving away from high-cost celebrity endorsements toward brand-centric messaging and digital platforms. Marketing spend as a percentage of revenue is expected to rise by 40-70 bps for the full year. The company highlighted successful viral campaigns on quick commerce platforms like Zepto and Blinkit, which helped drive a 70% growth in the online segment during Q3.

    03

    Mohey and Twamev Scaling

    The women's brand, Mohey, has seen significant traction, with productivity levels now matching the flagship Manyavar brand. Mohey typically occupies 25-30% of the retail area in Manyavar-Mohey combo stores and generates a commensurate 25-30% of the business. Meanwhile, the premium brand Twamev is being expanded with 2 new EBOs in Q4 and a 'super flagship' planned for Q2 FY26, targeting the premiumization trend in metro cities.

    04

    Disciplined Retail Expansion

    Management emphasized a disciplined approach to store openings, targeting 170,000 to 180,000 square feet of gross area addition for FY25. They are intentionally slowing down in certain core markets where rental inflation is deemed unsustainable, viewing store leases as long-term 9-12 year commitments. Despite the slowdown, the company maintains a strong pipeline and continues to see Tier 2 and Tier 3 cities outperform metros by about 5% in terms of growth delta.

    05

    Inventory and Supply Chain Exclusivity

    In response to analyst questions about sourcing, management clarified that while they have increased 'purchase of stock in trade' to roughly 24-25% of total stock to improve variety and localization, they maintain strict exclusivity deals with vendors. Any product purchased by Vedant Fashions is guaranteed to be exclusive to them, preventing commoditization and protecting the brand's design-led pricing power.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.